Lawmakers: Airlines shouldn't pocket taxes
Rather than passing the savings to customers when the FAA temporarily stopped collecting taxes on tickets, the airlines raised their prices.
This post comes from Kelly Phillips Erb at partner site Forbes.
Just a few days ago, we found out exactly what airlines thought of consumers when, after a lapse in the law allowed travelers to catch a bit of a break, a number of major carriers found a way to turn it to their advantage.
The glitch meant that airlines wouldn't be collecting taxes while the Federal Aviation Administration budget remained unconfirmed. That should have meant reduced fares for travelers. Instead, the airlines kept fares level and pocketed the difference.
Sadly, travelers seemed to accept the airlines' money grab as inevitable, shrugging their shoulders with a kind of "did you really expect any different?" kind of resignation.
Congress has not been so kind.
Congressional leaders, responding to the airlines, are demanding that airlines either hold the money in trust for the government pending a budget resolution or pass along the savings to travelers. Specifically, Senate Aviation Operations, Safety and Security Subcommittee Chairwoman Maria Cantwell, D-Wash., and Commerce Committee Chairman Jay Rockefeller, D-W.Va., sent a letter to Richard Anderson, CEO of Delta Airlines and chairman of the Air Transport Association, calling for an end to the profiteering:
We are deeply perplexed by the industry's pocketing of passenger tax revenue even though they expired on July 22, 2011. Most of ATA members have elected not to pass the savings along to consumers through reduced ticket prices, but rather have decided to increase the base fare of airline tickets. ... We urge the nation's airlines to put all of the profits that they are making from the lapse of the aviation taxes into an escrow account so that they can be transferred back into the Airport and Airway Trust Fund when Congress reinstates the taxes.
Cantwell and Rockefeller went on to point out that the very airline taxes that have recently (and temporarily) disappeared have been blamed for airline woes and consumer prices:
As we have heard from airlines for many years, these fees, all of which are passed on to the consumer, depress the demand for air travel, hurting the industry's bottom line.
Yet the airlines' rush to now pocket those very fees would imply something different. Post continues after video.
Interestingly, despite the fact that Democrats and Republicans can't agree on a budget, they do appear to agree that the airlines don't deserve to turn this into a loss for customers. Rep. John Mica, R-Fla., told CNN:
I expect airlines across the country to be good stewards of taxpayer dollars. Either voluntarily or through statute or through our next (FAA budget) extension, we'll make certain that the money does go into the trust fund and it isn't pocketed by the big airlines.
There's enough indignation to go around.
Just not by the airlines.
As expected, a public relations defense is being mounted by the airlines as we speak. The Air Transportation Association of America -- the same one that said less than two weeks ago that "hiking aviation taxes would slow economic recovery, further burden customers and cost jobs" -- now seems to take the position that price doesn't really matter.
ATA spokesman Steve Lott said about pocketing the difference: "Customers are not impacted and are paying the same ticket prices they were last week."
Whew. Cause here I was thinking that lower prices might translate into a better economy and benefit customers. I have to stop reading those ATA press releases.
More from Forbes and MSN Money:
Congressional Reform Act of 2011
1. No Tenure / No Pension.
A Congressman collects a salary while in office and receives no pay when they are out of office.
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All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.
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6. Congress must equally abide by all laws they impose on the American people.
7. All contracts with past and present Congressmen are void effective 1/1/12.
The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.
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13. The penalties for breaking the law shall be mandatory prison time, with no parole for any reason. Trials shall take place in the State where the crime was committed and not in congress!
This is how WE THE “POORLEY REPRESENTED” PEOPLE FIX CONGRESS
aw comeon...i am flying to fl. from newark next week. these taxes ONLY ADD UP TO ABOUT $30.00....it would help my pocket to keep it there but i GUESS THE AIRLINES NEED IT MORE!!! of course that is in addition to the $3,000,000,000 in extra fees they already are taking from us rich folks!!!
please note the absolute positive sarcasm!
Guess what? You should have thought about that before you greedy jerks took their lobbyist money and deregulated them. Now what? Are you going to fine them so they can pass that on to consumers as well? Sounds like something you overpaid windbags would do!
I'm glad to hear my favorite airline, Alaska Air, isn't doing this! Also why aren't people up in arms about American Airlines buying their new planes from
airbus( from England or Europe) instead of a US Co., Boeing? I , for one will not fly American Airlines again since they do not support the American economy.
Perhaps congress and the public should take note that Big Business and their Over Indulged CEOs only care about themselves. Business will gladly OVER TAX the public for their services.
Hey Congress the next time you pass a bill that favors Big Business maybe you should think back on this day. Of course if you would do you jobs this wouldn't be happening in the first place.
and now a company can spend untold amounts in an effort to elect the next American President, is this a great counrty or what!
THAT'S WHY BIG BUSINESS AND UNGODLY PROFITS ARE GOING TO RUIN THIS COUNTRY!
Get ready for a currency exchange to the Amero and eventually the Woro. If business isn't restrained and money contiunes to be what is cherrished most, the worlds economy will be even worse off than we are now. Credit Card Companies, Credit Card processing companies are a unregulated rip off to the American dollar. It's our money, how can it be stepped on so badly everytime it gets handled?
I think they are missing the main point. The airlines are mainly getting away with it because they did not raise the overall price of the ticket. The consumer is paying exactly the same as before the taxes expired. The main entity being hurt is the government because they are not collecting this tax.
Consumers have come to expect to be taken by the airlines and this really isn't impacting their overall cost of travel. The airlines are taking advantage to make a few extra buck while this is all in limbo and are not obligated to pay the government anything back.
The airlines are correct that "the price doesn't matter." Travelers have accepted every boneheaded nickel and dime fee they can dream up and are still buying tickets and flying. I will not be surprised that when the taxes are reinstated the overall price of the ticket will also rise to reflect the new taxes and the government will be blamed for the increase.
This is no different that what the oil companies are doing with gas prices.
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